As much as we are all tightening out belts, ditching home insurance simply isn’t a viable option: even if you are lucky enough to avoid crime, the cost of a flood or fire means that being without cover is the ultimate in false economies. But even if you are on a tight budget, there are plenty of ways to cut costs — and one method to avoid completely.
The best known, thanks to some memorable if irritating advertising, is shopping around for the best quote. The benefits should be obvious bearing in mind that home insurance is arguably the most competitive market in the insurance industry, but there are a couple of notes of caution. Make sure that if you rely on comparison sites, you try two or three different sites to make sure you aren’t missing any bargain. It’s also important to check individual policies carefully to make sure you are comparing like with like.
Getting the excess right is also an option for saving money: the more of any claim you’re willing to pay yourself, the lower the premiums. Which is the right level for you depends partly on whether you can afford to make a higher contribution if it comes to it, and partly on your general attitude to risk. High excesses also make sense if you believe you are less at risk than the insurer is assuming, though this can be a tricky business and generally insurers know what they are talking about.
Consider fitting approved locks or alarms as this can knock a fair chunk off premiums. Bear in mind that, if well maintained, these can last for many years, meaning they could be worth the investment even if the immediate savings don’t outweigh the cost. Think about joining a neighbourhood watch scheme: some insurers give discounts for this, and in any case you’ll be able to get good security advice.
For many people, the choice of payment plan may be the biggest factor in total cost, with some insurers charging high rates for those who choose to pay monthly rather than up front. Check the figures carefully, but you could even find that if you don’t have the cash to pay the entire premium at once, using an overdraft or credit card may still work out cheaper than the monthly payment scheme. Remember that you can pay a card or overdraft back as soon as you are able to, while an insurer will lock you in to the monthly repayments and interest charges.
There is one cost-cutting trick that you should never try though: deliberately listing a lower value than your goods are actually worth in an attempt to cut premiums. In extreme cases this can make your entire policy void, meaning you’ve wasted your premium and won’t recover any losses. More commonly you’ll fall victim to the proportionality system. Simply put this means that if the insurer decides your total cover limit is, for example, 75% of the actual value of your possessions, it will only pay out 75% of any claim, even if it’s for a single item that’s far below the total limit.
Guest post by Adam
